Projected to take place in mid-May the US govt will officially hit the $14,300,000,000,000 legal debt limit. When you consider the GDP is just under $15 Trillion it would take one year to pay off the debt. In other words, every thin dime would go to nothing more than debt. Not the military, social security, medicaid, WIC, or unemployment just the debt we owe globally. That would be one hard year, and it will never happen.
What may happen is the US credit rating taking a plunge back into the icy waters of recession. The recovery of Wall Street that is just beginning to trickle down to Main Street would freeze up. Treasury Secretary Timothy Geithner, was quoted in Bloomberg, A default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover. The majority of us are ill prepared for a second down-turn. Interest rates would sky-rocket making any thought of recovery in the housing market swiftly dissipate into nothing.
Geithner was quoted further, defaulting on the debt calls into question the willingness of the government of the United States to meet its obligations and would shake the basic foundations of the entire global financial system. The shock-wave that would spread would make the Euro Debt Crisis pale in comparison. The worlds largest economy in default would impact every major financial institution with such force that no one would be exempt from the black hole it would create.
What is the solution? In the short term the Debt Limit will have to be raised, but this is just a stop-gap while the tough choices will have to be made. What to cut, what to keep, who to tax more and how to pay for the debt with out getting further into debt. For the average investor they will need to be prepared with a strong Tangible Asset Portfolio as insurance against the total failure of the US economic system. Do not let the government’s lack of fiscal discipline hold your financial future hostage, update your TAP today.